Thursday, August 22, 2013

Rep. Steve Hickey Makes A Great Case to Raise the Minimum Wage

The other day Representative Steve Hickey posted this

20 AugThe proposed minimum wage increase in SD means $2965/yr added to my $454,481/yr daycare biz payroll. Curious how it would affect your biz.
I was curious, because I have had children in daycare full time and still have children in a home daycare after school hours, what would happen if the minimum wage allowed for one more child to go to his daycare?

20 Augstevehickey How much more would you make now that one more parent maybe able to send his/her child to your daycare?
His response:
21 AugLarsonTizzle ?no more . People at minimum wage can't afford daycare, period. We have a waiting list as is. May raise prices though. 
I think that make a pretty good case right there that "people at minimum wage can't afford daycare, period." that we should raise the minimum wage so that maybe they could afford daycare.  Except for the fact that many parents, if they work, have to figure out some kind of daycare for their children.  Most daycares charge about $125 a week for one child.  If he could get one more child enrolled to his daycare, that would mean an extra $6,250.  But he has a waiting list and can't afford to expand.  I understand that $2,965 is a significant amount of money.  It is nothing to sneeze at when you are a teacher, but if I was a math teacher I would have figured this out earlier.

His business payroll is $454,481 a year.  By his words, this is payroll and not other expenses.  The additional cost in payroll will be $2,965.  This means that his payroll cost will only go up .65%  That is a decimal point in from of that number 6 there.  His costs will go up less than 1%.  I guess that if you work for the daycare, you better not expect a raise anytime soon.  He also is short sighted and doesn't see how this might actually increase productivity and workers may be willing to stay longer.

Then I also did the math on the price increase he would have to charge the people that send their children.  A staff payroll of $454,481 means that he probably has a significant amount of children at his daycare.  I don't know the exact number, but lets play it very safe and say 60 children.  If he charges an extra dollar (THAT IS 1 DOLLAR) a week for the child, he would make $3000 and cover the extra cost.

To sum up Mr. Hickey's argument for the minimum wage.  His more than $500,000 business may see payroll cost increase less than 1%.  If he choose to pass that cost onto his customer, they would see a .66% increase in the price of send his or her child to what I am sure is an excellent daycare.  I think that provides an excellent case for increasing the minimum wage.

1 comment:

  1. This makes me smile. Are you seriously suggesting raising someone's pay .50 cents an hour will make them now able to afford daycare and that this will help my business? (I said i had a waiting list - my problem isn't trying to get one more kid in the building.) You could raise the minimum wage $5 an hour and they'd still need state subsidy to afford daycare. If you are making minimum wage you can't afford daycare. We have 125 kids or so in our daycare not including our after school program and 49 of our staff last year were part time . Health insurance premiums and mandates means we have to back off the number of full time positions and rely more on part time. 9 of those part time workers last year were below $8.50/ hour.

    However that low wage DOES NOT factor in is a substantial benefit I offer employees.... They can use the daycare themselves for $1-2 per hour per kid. If we raise wages, those types of benefits will be reduced or eliminated. Actually they've already been reduced. Several years ago I offered free daycare to employees. Do the math on what that benefit is worth for a single mother of two working a low wage at our daycare. Trust me it's huge.

    Here's another thing. Before you jump to conclusions that I have trouble keeping good people because I don't pay them, come visit and see that we have high morale and low turnover. We are eight years old and have people who've worked here since the start. We take care of people and they will tell you that - we've fixed or replaced employees cars, paid rent, given food, gift cards, given bonuses and free daycare at Christmas to employees and struggling parents.

    Did you know that no daycare in town is a moneymaker? In fact, unless a daycare is subsidized by a church or a company (for Wells Fargo or Citibank or Sanford Employees) or an in-home daycare, that a daycare can't even stay open unless they discontinue offering infant daycare. I calculated a a few years ago we were losing $100 a day in one of our nurseries. This is because the adult/baby ratio is 1:5. You lose money at that ratio even when the church/company or home daycare owner subsidizes the facility/building. To make up for this we have older age kids with a 1:10 ratio and there is margin there. You'll notice some daycares only have a token amount of babies and mostly toddlers and older kids. They make up for the money lost in infant care by starting after school programs as we have. If we put a notice on our sign that we have infant openings we'd have 20 new babies here tomorrow.

    My point is the minimum wage of some part-time employees is hardly a factor in daycare profitability - it makes it even harder to make it go. Please understand that judgments that we pay people low wages is hardly fair to the enormous amount of subsidy and benefits employees and parents are offered here and in other church and corporate daycares. For us it's a ministry first and a business second. In the places where it's only a business people drop infant care to a minimum even though that is what is most needed.